RSI Indicator in Forex Trading - Video
Today we are going to learn about the RSI indicator in Forex Trading. The RSI indicator is a technical momentum indicator which is also a lagging indicator as like all the other indicators. Where does the computers I need to the recent gains to the recent losses in an attempt to determine whether of the currency pairs going to be overbought or over sold, you will see that that the RSI’s number ranges from zero to hundred.
It is deemed to be overbought once he RSI approaches the 70 level and it tends to be overvalued at that level becomes a good candidate for a pullback that. It may correct when it reaches that level, but not necessarily, always remember that it is on a relative basis, and likewise as the RSI approaches 30 is an indication that this currency is undervalued, on a relative basis. Always remember that when using lagging indicators in forex trading everything is on relative terms, meaning that yes the currency is overvalued at the current time (much like the U.S. housing market is some locations), but that doesn’t mean that it won’t continue heading in the same direction. If it was easy, everyone would be rich right!?
The best way that I like to use RSI is rather than looking to see whether it's relatively overbought or oversold is to take divergence into account. Divergence in currency trading is the most powerful trading tool, but most people don't like to use divergence.
Another great way to get these oscillators is to just draw trend. What direction is it heading in? Is there a breakdown out from a triangle? Is there a trend that you can see clearly? Look for times when there is a momentum shift, or a reversal in the indicator. Does the indicator reverse when the currency pair runs out of steam? This may be a big indication that the preceding trend is over and the currency pair may reverse.
The RSI indicator has gained popularity here in recent times however it is never an indicator that should be used by it self. The RSI indicator should always be used with other tools in making entry position decisions with your forex trading strategy.
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